CRTC Message to Broadcasters: Regulatory Games Coming to an End

Last week, the Canadian Radio-television and Telecommunications Commission announced that it is terminating the Local Programming Improvement Fund (LPIF). The fund, which was established in 2008, funneled over $300 million to broadcasters to support the creation of local programming. The decision caught the industry by surprise with the CBC calling it “astonishing” and Bell Media saying it is a “major concern.”

Yet the end of the LPIF is only the latest in a series of moves that unravel recent regulatory efforts to provide broadcasters with increased financial support. My weekly technology law column (Toronto Star version, homepage version) notes the courts and the Commission have sent a clear signal that broadcasters should focus on marketplace success, not manipulating the regulatory system.

The past five years have been marked by enormous change in the Canadian broadcasting sector. The emergence of Internet video and online alternatives such as Netflix, an economic downturn that hurt advertising revenues, and media mergers among broadcasters and broadcast distributors left the CRTC scrambling to address a steady stream of demands for assistance from broadcasters and cultural groups.

The result was a myriad of proposals with the common theme that consumers would be footing the bill. The CRTC first established the LPIF, which added 1.5 percent to consumer cable and satellite costs to help support local television programming. In 2009, broadcasters renewed longstanding efforts for a fee-for-carriage system that would have added up to $10 to subscribers’ monthly bills to pay for local television stations. Soon after came demands to regulate over-the-top video services such as Netflix and to implement fees for Internet providers to support the creation of new Canadian content.

2012 has spelled the end for most of these plans. In February, the Supreme Court of Canada decisively rejected the possibility of new Internet provider fees. Two months later, the Commission released a public letter indicating that it was dropping plans for another “fact finding” exercise into online video. The letter was widely seen as a clear indication that the CRTC had no interest in regulating online video services.

The trend continued last week with the termination of the LPIF as of 2014. The decision split the Commission, with five commissioners voting to terminate the LPIF, three publishing dissents in favour of continuing it, and one commissioner, Michel Morin, issuing a separate opinion that supported terminating the fund.

The majority indicated that fund had achieved its goals and that it would be inappropriate to continue to charge consumers over the long-term, particularly since broadcasters such as the CBC and Shaw acknowledged they would continue to support local programming with or without extra funding.

Morin provided a more insightful take, acknowledging that “no one can say today with certainty that this generous $300 million envelope has significantly increased the overall production of local news.” In fact, he noted that the LPIF lacked even basic reporting requirements. Few stations were able to point to specific news programming that been funded by it and millions were provided to companies such as the CBC, Rogers and Quebecor without any details on how much each station received.

The termination of the LPIF leaves only the fee-for-carriage initiative alive, as it awaits a decision on its legality. Yet even if the Supreme Court rules that a fee-for-carriage system is permitted under the law, it is far from certain that the CRTC will give it the green light.

In fact, having addressed the broadcast side of the equation, the CRTC took on the other big television question on Friday by tackling the restrictive consumer choices offered by cable and satellite companies. The Commission unveiled new rules that will allow consumers to select individual channels rather than expensive large packages.

It is early days for new CRTC Chair Jean-Pierre Blais, but there are signals that the regulatory experiments of the past few years may be coming to an end with a majority of CRTC commissioners content to allow Canadians to become the arbiters what they watch and pay for.

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  1. Devil's Advocate says:

    “The Commission unveiled new rules that will allow consumers to select individual channels rather than expensive large packages.”

    This is long overdue!
    Cable companies have been sidestepping the whole “a la carte” question for quite some time, as it would make it much harder to gouge their customers. Expect a lot of kicking and screaming from the providers on this one.

    “The CRTC first established the LPIF, which added 1.5 percent to consumer cable…”

    Since the LPIF is being discontinued, it would only be logical the customer will no longer be paying that extra 1.5%, but I’d be willing to wager the customers’ rates will see no reduction.

  2. ‘Canadian content’ a barrier to ‘a la carte’ packages
    I was told a long time ago that the biggest barrier to ‘a la carte’ channel selection was the requirement to maintain a certain amount of Canadian content in each of the packages offerred. Not necessarily a desire t gouge customers. Have Canadian content rules changed in order to allow for these new rules? Or will it still have some impact?

  3. Devil's Advocate says:

    Content Barrier?

    I don’t see how content requirements of any kind would prevent a provider from offering channels individually.

    People only watch the channels they intend to view, anyway, regardless of what “packages” are bundled.

  4. I say what local programming….The CTV station cfcf channel 12 here in Montreal has NO local programming except for the news. When cfcf was an affiliate of CTV the station had set up CHAMPLAIN PRODUCTIONS to produce local shows. We had shows for the teenagers….. Like Young being the most memorable.Childrens shows like Magic Tom and Johnny JellyBean. Game shows like Its Your Move. The list goes on For once the CRTC did something right. All we get now is the crap from Toronto. Gone are the all-night movies and classic tv shows,What we are left with are nights with INFOMERCIALS.

  5. @Heather
    I remember a few years ago now that there was a provider in the Toronto area that offered an a la carte offering via an over the air subscription service. If I remember correctly it was Look TV. When getting an answer from one of the providers, you need to be careful when looking at the answer, and put it in the context of who provided the answer. For instance, would a company like Rogers really indicate that there is no reason that they couldn’t offer an a la carte subscription model?

  6. OFF TOPIC says:

    RIAA: Online Music Piracy Pales In Comparison to Offline Swapping
    A leaked presentation from the RIAA shows that online file-sharing isn’t the biggest source of illegal music acquisition in the U.S. The confidential data reveals that 65% of all music files are “unpaid” but the vast majority of these are obtained through offline swapping.

    The report further shows that cyberlockers such as Megaupload are only a marginal source of pirated music. …

    Of all “unpaid” music less than 30 percent comes from P2P file-sharing or cyberlockers.

    In total, 15 percent of all acquired music (paid + unpaid) comes from P2P file-sharing and just 4 percent from cyberlockers. Offline swapping in the form of hard drive trading and burning/ripping from others is much more prevalent with 19 and 27 percent respectively.

    This leads to the, for us, surprising conclusion that more than 70% of all unpaid music comes from offline swapping.

  7. a la carte says:

    Digital TV vs Analog
    There was a technical reason: it is messy to block out individual analog TV channels by analog filters on the subscribers’ cable. With digital TV, that is no longer the case.

    The ruling is not an entirely win for the consumers. CRTC rubber stamped BCE’s proposal. BCE are not exactly representing the consumers.

  8. @Anon-K
    I’m honestly not sure what you are saying that is in response to the question I asked? Can you clarify that?